Russia’s rusting oil tanker fleet is putting to sea with newer ships Ship’s crew

By Alex Longley and Serene Cheong

(Bloomberg) — An armada of tankers hauling sanctioned oil around the globe is getting younger, bucking a month-long trend of using the world’s oldest and most dangerous ships.

Shortly after President Vladimir Putin’s invasion of Ukraine early last year, hundreds of old tankers were bought up by a cohort of faceless traders, middlemen and investors to keep Russian oil flowing. By some estimates, the purchases, which added to the vessels already transporting crude oil for Venezuela and Iran, created a dark fleet of more than 900 men.

According to data from VesselsValue Ltd., a market researcher for shipping shops, the average age of the ships purchased is falling. Two industry executives said strict measures in Asia are likely to be catalysts for change after a spate of arrests over security concerns in recent months.

READ ALSO: Aging Shadow Fleet With Russian Oil Poses Disaster Risk

China, a major consumer of Russian and Iranian oil, recently tightened controls on older tankers in the key port of Qingdao, forcing some to wait more than a month for their cargo to be unloaded. Concerns about aging ships grew after a 26-year-old ship exploded off Malaysia in May.

Also, in Singapore, so many tankers have been detained in recent months for failing safety inspections. Newer vessels, if well maintained, should help allay some importers’ concerns about their seaworthiness, although the fleet continues to be overrun with vintage vessels.

“Safety concerns about older vessels are one of the reasons buyers are choosing newer vessels,” said Rebecca Galanopoulos Jones, senior analyst at VesselsValue.

The median age of tankers sold to unknown buyers – a hallmark of a ship being part of the dark fleet – has fallen to 15 years this month, according to VesselsValue. In October it was 19 years.

demolition delay

The specifics of Dark Fleet tankers vary. Often, however, these are older vessels without industry-standard insurance or other Western services, and their owners are difficult to trace. Ships are nearly 20 or older, an age at which ships are typically scrapped.

Certain countries have a strict stance on older ships. In addition to Chinese cheques, India Earlier this year, the Commission decided to ban ships older than 25 years from entering its ports.

“Some shipowners are becoming more accustomed to dealing with restricted crude, such as from Russia, as they recognize that this trade will be permanent,” said Anoop Singh, global head of marine research at Oil Brokerage Ltd. “They’re more willing to do it now. Invest in younger ships that are longer in line with broader industry standards.”

When buying for the Russia trade first came up, it made sense to buy the oldest ships available. These ships are the cheapest and, by operating without Western services, have been able to circumvent many of the sanctions placed on oil exports, including a $60 per barrel price cap on Russian crude imposed by the Group of Seven.

The increasing demand for ships has increased the lifespan of many ships. According to Clarkson Research Services Ltd., a unit of the world’s largest shipping broker, not a single large crude oil tanker has been scrapped in seven months, which has not happened since at least the mid-1970s.

Tankers also spend more time in transit. The buyer base for Russian crude has dwindled since the war, with shipments that used to take days across the Baltic now taking weeks to get to China and India.

As a result, benchmark yields for oil tankers have risen to around US$100,000 per day twice since the outbreak of the war, compared to an average of US$23,000 per day since 2017. Further purchases of younger vessels increase the chances that tariffs will rise in the wake of the war Lowering the oil tankers to return to the higher level Delivery of vessels for conventional transport.

There are strong safety reasons for switching to newer vessels. In May, an inspection in China found that an aging tanker had more than 20 defects. And also many of the older tankers that can serve the trade have already been acquired.

“The pot of old ships is running out so it’s a natural progression for newer ships to take over,” said Halvor Ellefsen, a tanker broker at Fearnleys Shipbrokers UK Ltd. “If this continues, it will mean a tighter regular tanker market, but also a more secure supply of oil from sanctioned countries.”

–Assisted by Ann Koh, Elizabeth Low, Sharon Cho and Alaric Nightingale.

© 2023 Bloomberg LPShare

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